RBI VRRR operations garner ₹1.62 lakh crore bids during system cash crunch
GS3Economy · S&T · Environment · Security· Monetary policy, RBI & banking· Prelims·
Monetary policy tools: a GS3 case study on liquidity management and systemic stability.
Why in news
The Reserve Bank of India (RBI) conducted Variable Rate Repo (VRRR) operations to address a system cash crunch, receiving bids of ₹1.62 lakh crore for a ₹50,000 crore liquidity infusion.
Background
The RBI's VRRR operations saw a massive bid-to-target ratio during a liquidity crunch. This followed a period of peak surplus (₹11 lakh crore) in mid-September after the conclusion of an incentives-laden forex-inflow program.
Facts for Prelims
- BodyVRRR: Variable Rate Repo is a liquidity management tool used by the Reserve Bank of India (RBI).
- FactThe RBI received bids of ₹1.62 lakh crore for a ₹50,000 crore liquidity infusion during the reported cash crunch.
- FactA peak surplus of ₹11 lakh crore was recorded in mid-September 2026.
Prelims practice question
Which of the following is a liquidity management tool used by the Reserve Bank of India?
- (a)Fixed Rate Repo (FRR)
- (b)Bank Rate
- (c)Marginal Standing Facility (MSF)
- (d)Variable Rate Repo (VRRR)
Show answer
Answer: (d) Variable Rate Repo (VRRR) — The note identifies VRRR as a liquidity management tool used by the RBI.
For Mains
Q. Discuss the role of Variable Rate Repo (VRRR) operations in managing systemic liquidity and maintaining monetary stability in the Indian economy.
Dimensions to cover in your answer
- Liquidity management: Balancing systemic cash requirements with the need to control inflation via repo operations.
- Monetary policy transmission: Impact of high bid-to-target ratios on short-term interest rate volatility.
- Forex-liquidity link: Correlation between forex-inflow programs and domestic banking system liquidity.
Keywords: Liquidity Management · Variable Rate Repo · Monetary Policy · Systemic Cash Crunch · Forex-Inflow
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